It’s no surprise that the pandemic hit the food industry hard, from restaurants to retailers, and rising inflation is causing dwindling profits. Its impact has changed the way consumers buy, cook, and eat food. As inflation increases, one in three diners seeks more affordable dining options, deals, or inexpensive menu items.
Raw materials, energy, staff—the restaurant industry is groaning under increasing cost pressure. But how can you create higher purchase prices without losing customers? After all, their disposable income also shrinks every time they stop for gas or go to the supermarket.
Prepare a Slow Strategy
It’s not essential to rush a price increase on menu items, but it is necessary to have a strategy before doing so. Together with your customers, you will find prices that increase profitability without losing guests or damaging your brand.
The most urgent issue is undoubtedly the rising cost of goods. Prices are currently rising everywhere, from the availability of goods to energy costs. There’s current pressure on the global supply of wheat and other crops, and increasing oil and gas prices also directly impact food and paper costs since everything has to be produced and transported. Restauranteurs feel this chain reaction in a real way.
Will Prices Remain High in the Long Term?
Forecasts of long-term high costs are almost impossible because there are too many factors to consider. In the past, purchase prices were usually fixed, whereas today, contracts are renegotiated nearly every month. The periods are getting shorter and shorter, with the corresponding effects on planning. Prices may no longer rise as abruptly and quickly, but the generally high costs will probably remain with us for a while.
Do I Need to Adjust My Menu Prices Every Month?
You shouldn’t need to adjust menu prices every month. Consumers are also experiencing a significant increase in their cost of living, while wages aren’t matching this increase. This reduces the disposable income of many people, who then either have to dip into their savings or change their spending behavior.
It’s impossible to predict exactly how consumers will react to this. Are you customers building their savings accounts, or is their desire to enjoy and spend money returning after two years of the pandemic? It’s still too uncertain to guess how consumers will react, so there’s no need to constantly change your menu.
How Can I Increase Menu Prices Without Losing Customers?
The currently high inflation is actually helping because consumers are confronted with price increases everywhere and often expect to pay more in restaurants than they used to. The guest’s willingness to pay is always the decisive factor in how much you should raise menu prices.
However, this approach is currently reaching its limits. On the one hand, many restaurateurs have no choice but to adjust their prices because of the rising inflation, but it’s even more challenging to assess the guests’ reactions than before. That’s why it’s more important than ever to understand what guests are actually willing to pay for a product.
If you raise menu prices and your diners feel like they’re being gouged, you can lose long-time customers and have your entire brand called into question.
How to Adjust Prices to Beat Rising Inflation
It’s not enough to simply add a dollar or two to your previous price. That’s not a sustainable pricing strategy. Rather, beat rising inflation costs by influencing customers’ behavior and thus maximizing profit. This includes adding products or removing them from the menu if you’re not making any profit from them.
With cleverly devised bundles, the guest receives added value for which they will pay more. Another way to control behavior is, for example, to increase the price of unprofitable products for which consumers are very price-sensitive, shifting demand towards products with better margins.
You can also charge a higher price when you surpass the standard version of a product in the guest’s perception, whether with a larger portion or premium ingredients.
The Best Partner During Rising Inflation is a Dependable Distributor
Taylor Freezer of Michigan is a distributor of cooking equipment, commercial juicing, refrigeration, and ice cream and frozen yogurt equipment. We understand rising inflation is hurting everyone, and we promise to only offer the best deals on equipment and service to keep your business running smoothly. Let us show you that you can still be profitable with the right partner. Call us today at 734-219-9969.
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